NAMA sells €800m loans in Paddy McKillen’s Maybourne group at a profit

Judging by the hoopla that surrounded the off-market sale of the Montevetro building in Dublin to Google by a NAMA developer at the start of this year – which until this morning was the only confirmed sale publicised by the agency – we may never hear the end of the sale announced just now by NAMA of €800m of loans attached to the Maybourne hotel group. It has just been announced that NAMA has recouped 100% of the face value of the loans (which include interest) in its “successful” sale of the loans to a company controlled by the Barclay twins, two 76-year old Scottish brothers who own Britain’s Daily Telegraph and the 5-star Ritz hotel, about a kilometre distant from the three prized hotels which comprise the main assets of the Maybourne Group, the Berkeley in London’s Knightsbridge and Claridges and the Connaught, both in London’s Mayfair.

According to RTE, NAMA acquired the loans attached to the Maybourne Group “at a discount”. RTE doesn’t disclose its source but in its management reports NAMA has confirmed that a small number of loans were acquired with discounts of 0-10% which leaves open the possibility that NAMA acquired some loans without discounts. NAMA hasn’t revealed its profit on the loans, and judging by past history with the Montevetro transaction, the agency will remain tight-lipped about the profit or loss. Don’t worry though about the profit or loss; just feel the revenue – €800m!

So, NAMA sold some loans. What else is of interest? The transaction again underlines the strength of the property market in prime centralLondonwhich is good news because NAMA is understood to have quite a few loans secured by property there. And whilst it is not yet clear how the Barclays are financing the transaction, the presence of €800m is indeed good news for property generally in central London – although the UK hasn’t suffered the same credit drought as Ireland, the streets aren’t lined with bankers distributing money either. Lastly, in terms of NAMA, it is not yet clear if today’s announcement scuppers previous reporting of sales of loans in the Maybourne Group to Malaysian sovereign wealth fund, 1MDB and to Robert Tchenguiz.

Beyond NAMA, it will be interesting to see how control of the Maybourne Group will change with the transaction. Remember Paddy McKillen was the biggest shareholder in the group, and he won’t want to relinquish that control without seeing value for his investment. Dramas in the boardroom can’t be ruled out.

This post may be updated with any further news on this transaction, and what it means for NAMA and for Paddy McKillen.

UPDATE: 29th September, 2011. NAMA’ s press release announcing the disposal is available from the agency here.

UPDATE (1): 30th September, 2011. Some interesting news and claims in today’s reporting of the transaction. The BBC is claiming that by controlling the loans, the Barclay twins “have acquired the hotels”. Of more significance but probably related to the BBC report is the Belfast Telegraph’s reportingof Paddy McKillen’s response to NAMA’s announcement : “He is investigating the deal and is concerned about how the sale may affect his shareholding” said Paddy’s spokeswoman who hasn’t yet responded to a request for comment from here.  The paper also says  that Paddy  “was considering mounting a legal action to scupper the deal, claiming he wasn’t consulted”
UPDATE (2): 30th September, 2011. For a superbly detailed report of yesterday’s transactions and what it means for Maybourne’s debt and equity, I’d recommend a read of Mike Phillips report in today’s Property Week.

UPDATE: 1st October, 2011. Well this is beginning to have the makings of an entertaining spectacle: Paddy McKillen has, according to the Irish Independent today, “insisted he remains the largest shareholder in the group” and there are “suggestions” Paddy should have been given a right of first refusal in the sale of the loans and/or the sale of other shareholdings, notably Derek Quinlan’s. NAMA for its part is reported to be claiming that the sale of the loans is “closed”, that is to say, finalised, done-and-dusted. With Property Week yesterday claiming the Barclays controlled 64% of Maybourne’s equity and Paddy now apparently claiming to be the largest shareholder, it looks as if the drama predicted here on Thursday may unfold sooner rather than later.

UPDATE (1): 4th October, 2011. Simon Carswell pens a piece in today’s Irish Times which focusses on the judgment against Derek Quinlan in respect of a loan for a yacht but almost as a footnote mentions the Maybourne transactions and claims “Mr Quinlan still owns 35 per cent of the hotel group but the debt on his shareholding is now owned by the Barclay brothers”

UPDATE (2): 4th October, 2011. The Irish Times Cantillon column probes the shareholding arrangements in more detail and seems to conclude that the Barclays “effectively” now control 63 per cent of the company, but the column poses questions as to what has in fact happened with Derek Quinlan’s shareholding.

UPDATE: 12th October, 2011. Neil Callanan who used write for Ireland’s Sunday Tribune before it folded at the start of this year is now writing for Bloomberg and reports that Paddy McKillen has opened an action in London’s High Court, apparently to protect his shareholding but it is not quite clear what this entails. The case title is: “McKillen v. Barclay & Ors.” and the case number is HC11C03437 in the High Court of Justice, Chancery Division (London).

UPDATE (1): 13th October, 2011. EDIT. The Irish Independent has two Paddy-positive articles in which the Maybourne sale by NAMA is questioned. The first has Paddy criticising NAMA’s abilities to maximise returns and the second just questions why NAMA sold the loans now. Meanwhile Britain’s Legal Week demonstrates how much of a jamboreee this transaction was for the lawyers. It says “Hogan Lovells, which was appointed to NAMA’s inaugural legal panel last year, advised the body through a London-based team led by restructuring partner Paul McLoughlin, who was assisted by senior associate Stuart Tait. The firm, which worked alongside Ireland’s Maples and Calder, initially advised NAMA in April on a restructuring of AIB and Bank of Ireland’s debt initially provided to Maybourne, which transferred to NAMA”

UPDATE (2): 13th October, 2011. The Irish Times reports that Paddy is considering suing NAMA in the Irish courts. “Mr McKillen is examining the possibility of taking an action against NAMA in the Irish courts as he believes the agency did not follow fair procedures selling the group’s debt to the two brothers.” There also seems to be a claim that Paddy was given just 57 minutes notice of the sale, though it is not at all clear if he was entitled to any notice whatsoever.

UPDATE (3): 13th October, 2011. It is hard to know if a feature article in the Independent today on Paddy’s Maybourne stake-holding is a business story or a human interest story. It opens with some cutesy tale of Paddy being turfed out of his accommodation at Claridge’s because the hotel needed the room, presumably for paying customers. Paddy describes NAMA as a bunch of “corporate terrorists” who are motivated by “vengeance” and Paddy was “shocked” (absolutely shocked) to only receive 57 minutes notice of NAMA’s sale of the loans in his Maybourne group. There is a continuation of a theme that NAMA is not acting in the interests of the Irish tax-payer but there is sweet little evidence to support that claim. Paddy may attempt to take legal action against NAMA in the Irish courts but apparently “you can’t put toothpaste back in the tube” and NAMA has apparently cashed the €800m cheque.  Putting the cutesy stuff to one side, it does seem as if Paddy who was at the forefront of the Maybourne venture is seeking to maximise value from his investment, and given London’s recovery from the financial crisis, it must be galling to have control of the group wrested from you possibly on the cusp of the return to the good times. That said, there is no suggestion that there was a better offer available to NAMA who can’t simply sit on assets and await an uncertain recovery, and risk a possible decline in values.